Global Economy

South Asia is set to remain relatively insulated from some of the rising uncertainties that are looming large on the global economic horizon. The region will retain its top spot as the world’s fastest-growing region. The Siddhirganj Power Project in Bangladesh. Credit: Ismail Ferdous/World Bank

If, like me, you’re a firm believer in New Year’s resolutions, early January ushers in the prospect of renewed energy and exciting opportunities. And as tradition has it, it’s also a time to enter the prediction game.

Notably, and despite increasing conflicts and growing fragility, Afghanistan is expected to increase its growth to 2.7 percent rate this year.

In this otherwise positive outlook, Pakistan’s growth is projected to slow to 3.7 percent in fiscal year 2018-19 as the country is tightening its financial conditions to help counter rising inflation and external vulnerabilities.

However, activity is projected to rebound and average 4.6 percent over the medium term.

Its annual average economic growth of 7.6 percent between 2007 and 2017 far exceeds the average global growth rate of 3.2 percent.

This high growth has contributed to reducing poverty: Extreme poverty was mostly eradicated and dwindled from 8 percent in 2007 to 1.5 percent in 2017, based on the international poverty line of $1.90 a day (at purchasing power parity).

Access to basic services such as health, education and asset ownership has also improved significantly.

The country has a total of 32 hospitals and 208 basic health units, with each district hospital including almost always three doctors.

The current national literacy rate is 71 percent and the youth literacy rate is 93 percent.

The new Doing Business ranking places Sri Lanka at 100 out of 190 economies, compared with 111 last year. This year Sri Lanka made it easier for businesses to register property, obtain permits, enforce contracts and pay taxes. Credit: World Bank

Rikweda, an Afghan fruit processing company in the Kabul Province is well on its way to restoring Afghanistan as a raisin exporting powerhouse—a status the country held until the 1970s when it claimed about 20 percent of the global market. Credit World Bank

Imagine a state-of-the-art processing plant that harnesses laser-sorting technology to produce a whopping 15,000 tons of raisins a year, linking up thousands of local farmers to international markets and providing job opportunities to women.

In Afghanistan’s volatile business environment, let alone its deteriorating security, Rikweda’s story is an inspiration for budding entrepreneurs and investors.

It also is an illustration of the government’s reform efforts to create more opportunities for Afghan businesses to open and grow, which were reflected in the country’s record advancement in the Doing Business 2019 index, launched today by the World Bank.

Progress is being made on the largest railway project in India's modern history – the Dedicated Freight Corridor Program. View the 3D presentation here
Thump…thump…thump...like a slow rhythmic drum, concrete ties that hold the track in place are laid down one after another with the latest machinery as rails are placed precisely on top of them.

It’s nearing sunset near the town of Hathras in India’s state of Uttar Pradesh, home to 220 million people—more than the entire population of Brazil.

Through these efforts, DFC is expected to improve transport and trade logistics – bringing much needed jobs, connectivity, and urbanization opportunities to some of India’s poorest provinces – including Bihar and Uttar Pradesh while helping protect the environment. The electric locomotives will help ease India’s energy security issues and escalating concerns about traffic accidents, congestion, carbon emissions, and pollution created by road traffic.

This Bangladeshi woman was born in poverty. With the right kind of education, life in poverty quickly became a story from the past for her. Credit: World Bank

"I have a four-year-old son back in my village. I want to make a better life for him,” says Sharmin Akhtar, a 19-year-old employee in one of Dhaka’s many flourishing garment factories.

Like thousands of other poor women, Sharmin came down to Bangladesh’s capital from her village in the country’s north to seek a better job and create a more prosperous future for her family—leaving behind a life of crushing poverty.

Today, as we mark End Poverty Day 2018, it’s important to note that Sharmin’s heartening story is one of many in Bangladesh and the rest of South Asia, where economic growth has spurred a dramatic decline in extreme poverty in the last 25 years.

True, the extreme poverty rate is significantly lower in India relative to the average rate in Sub-Saharan Africa. But because of its large population, India’s total number of poor is still large.

And while there has been a substantial decline in the numbers and rate of people living below $1.90 in South Asia, the number of people living on less than $3.20 has declined by only 8 percent over 1990-2015 because of the growing population.

The new federal structure also redefines the World Bank Group (WBG)’s engagement with Nepal. This week, as the WBG’s Board of Executive Directors endorsed a new five-year Country Partnership Framework (CPF), Nepal’s Finance Minister Yuba Raj Khatiwada attended a series of Nepal Day events at the WBG headquarters in Washington DC. There, he unfurled the new government’s vision and development priorities and discussed approaches to address Nepal’s financing and knowledge needs in the WBG’s upcoming programme of assistance.

Finance Minister Yuba Raj Khatiwada's Vision for Nepal's Future

The CPF is designed to balance support to Nepal’s transition to federalism with its quest for higher growth, sustained poverty reduction and inclusive development. To that end, our strategy and approach seeks to support the authorities and engage with development partners in three transformative engagement areas: (i) public institutions for economic management, service delivery and public investment; (ii) private sector-led jobs and growth; and (iii) inclusion for the poor, vulnerable, and marginalised groups, with greater resilience against climate change, natural disasters, and other exogenous shocks. These focus areas were informed by extensive consultations and surveys across the country’s seven states with over 200,000 citizens, government, civil society organisations, the private sector, media and development partners.

In many respects, Nepal is starting from a clean state. While Nepal did practise a limited version of decentralisation in the early 2000s, the scope of devolution proposed by the 2015 Constitution is unprecedented. Meanwhile, reforms promise to rid the country of a legacy of exclusion based on geography, ethnicity and gender.

Over the last decade, Nepal experienced frequent government turnover and political fragmentation with a considerable toll on development. The 2017 elections mark a significant turning point, in that they offer higher hopes for political stability and policy predictability that remained elusive during most of Nepal’s recent past. This is a considerable achievement.

Nepal now faces the daunting task of adapting to a three-tier structure in the face of nascent and often-nonexistent institutions at the sub-national levels. Immediate challenges include the need to clarify the functions and accountabilities of the federal, state and local governments; deliver basic services and maintain infrastructure development; enable the private sector; and ensure strong and transparent governance during the early years of federalism. Meanwhile, if left unmet or unmanaged, heightened public expectations of federalism could rapidly degenerate from anticipation to disillusionment.

Transport corridors offer enormous potential to boost South Asia’s economies, reduce poverty, and spur more and better jobs for local people, provided the new trade routes generate growth for all and limit their environmental impact. Credit: World Bank

This blog is based on the report The Web of Transport Corridors in South Asia -- jointly produced with the Asian Development Bank, the United Kingdom’s Department for International Development, and the Japan International Cooperation Agency

One of the oldest, the Grand Trunk Road from the Mughal era still connects East and West and in the 17th century made Delhi, Kabul and Lahore wealthy cities with impressive civic buildings, monuments, and gardens.

In India alone—and likely bolstered by the successful completion of the Golden Quadrilateral (GQ) highway system—several transport proposals extending beyond India’s borders are now under consideration.

They include the International North-South Transport Corridor (INSTC), linking India, Iran and Russia, the Asia-Africa Growth Corridor, and the Bangladesh, China, India, and Myanmar (BCIM) economic corridor.

The hope is that these transport corridors will turn into growth engines and create large economic surpluses that can spread throughout the economy and society.

These two cities are the economic hubs of China and India respectively, two emerging global powers.

The distance between them, about 5,000 kilometers, is not much greater than the distance between New York and Los Angeles.

But instead of crossing a relatively empty continent, a corridor from Shanghai to Mumbai—via Kunming, Mandalay, Dhaka, and Kolkata—would go through some of the most densely populated and most dynamic areas in the world, stoking hopes of large economic spillovers along its alignment.

“Build and they will come” seems to be the logic underlying many massive transport investments around the world.

However, the reality is that not all these investments will generate the expected returns.

Worse, they can become wasteful white elephants—that is, transport infrastructure without much traffic—that would cost trillions of dollars at taxpayers’ expense.

First, countries need to change the mindset that transport corridors are mere engineering feats designed to move along vehicles and commodities.

Second, sound economic analysis of how corridors can help spur urbanization and create local jobs while minimizing the disruptions to the natural environment, is key to developing successful investment programs.

Specifically, it is vital to ensure that local populations whose lives are disrupted by new infrastructure can reap equally the benefits from better transport connectivity.

For instance, more educated and skilled people can migrate to obtain better jobs in growing urban areas that are benefiting from corridor connectivity, while unskilled workers may be left behind in depopulated rural areas with few economic prospects.

But while corridors can create both winners and losers, well-designed investment programs can alleviate potential adverse impacts and help local people share the benefits more widely.

In that vein, India’s Golden Quadrilateral, or GQ highway system, is a cautionary tale.

The sigining of an agreement for educational exchange between the Ministries of Education of Bangladesh and China's Yunnan Province.

With its youthful workforce and the aspiration to be a developed country by 2041, Bangladesh emphasizes skills development to provide its people the ability to transform the country into a high productivity economy. To accelerate progress in this area, the government has been actively tapping into greater South-South cooperation, especially with other Asian countries.

Bangladesh and the China’s Yunnan Province’s partnership on the Skills and Training Enhancement Project (STEP) is one example. Following the International Skills Conference held in Dhaka held in March 2018, a Bangladesh delegation, led by Mr. Md. Alamgir, Secretary of the Technical and Madrasah Education Division of the Ministry of Education, visited technical education institutions in Yunnan that are expected to receive students from Bangladesh.

Expert trainers in China will help their Bangladesh counterparts improve in the areas of student exchange, teachers’ professional development, and knowledge sharing among others. The agreement will mean that that the first cohort of 85 Bangladeshi students will be enrolled in the partnered Yunnan institutions with scholarships by September 2018.